KIEV, Feb 19 (Reuters) - Western powers threatened sanctionson Wednesday over the death of 26 people in the worst violencesince Ukraine's independence from the Soviet Union, pressuringPresident Viktor Yanukovich to compromise with his pro-Europeanopponents.

Yanukovitch, backed by Russia, denounced the overnightbloodshed in central Kiev as an attempted coup and his securityservice said it had launched a nationwide "anti-terroristoperation" after arms and ammunition dumps were looted.

In the western bastion of Ukrainian nationalism, a regionalassembly declared self-rule and crowds seized public buildings.

European Union leaders condemned what they called "theunjustified use of excessive force by the Ukrainian authorities"and said they were urgently preparing targeted sanctions againstofficials responsible for the crackdown.

EU officials said Yanukovich himself would not be on thelist to keep channels of dialogue open. The foreign ministers ofGermany, France and Poland will visit him on Thursday, hoursbefore an emergency EU meeting to decide on the sanctions.

The United States, going head to head with Russia in adispute heavy with echoes of the Cold War, urged Yanukovich topull back riot police, call a truce and talk to the opposition.

Neighbouring Poland's prime minister, Donald Tusk, saidUkraine faced civil war, even partition, if dialogue fails:"What if no compromise is achieved?" he asked in parliament. "Wewill have anarchy and perhaps division of the state or civilwar, the beginning of which we may now be witnessing."

Protesters have been occupying central Kiev for almost threemonths since Yanukovich spurned a far-reaching trade deal withthe EU and accepted a $15-billion Russian bailout instead.

The sprawling nation of 46 million, with an ailing economyand endemic corruption, is the object of a tug-of-war at aglobal level between Moscow and the West. But the struggle wasplayed out at close quarters, hand to hand, in fighting throughthe night on Kiev's Independence Square, or Maidan.

After night fell, fires blazed along the barricadedfrontline between the protesters and riot police but there wasno immediate sign of a repetition of Tuesday's violence.

Russian President Vladimir Putin and Yanukovich spoke bytelephone during the night and both denounced the events as ancoup attempt, a Kremlin spokesman said.

Moscow announced on Monday it would resume stalled aid toKiev, pledging $2 billion hours before the crackdown began. Themoney has not yet arrived and a Ukrainian government source saidit had been delayed till Friday "for technical reasons".

Ukraine's hryvnia currency, flirting with its lowest levelssince the global crash five years ago, weakened to more than 9to the dollar for the second time this month.

BATTLE ZONE

After a night of petrol bombs and gunfire on IndependenceSquare, a trade union building that protest organisers had usedas a headquarters stood blackened and gutted by fire.

Security forces occupied about a third of the square - thepart which lies closest to government offices and parliament -with protesters reinforced their defences on the remainder of aplaza they have dubbed "Euro-Maidan".

In a statement posted online in the early hours, Yanukovichsaid he had refrained from using force during three months ofunrest but was being pressed by "advisers" to take a harderline: "Without any mandate from the people, illegally and inbreach of the constitution of Ukraine, these politicians - if Imay use that term - have resorted to pogroms, arson and murderto try to seize power," the president said.

He declared Thursday a day of mourning for the dead. Thestate security service said it had opened an investigation intoillegal attempts by "individual politicians" to seize power.

One opposition leader, former world champion boxer VitalyKlitschko, walked out of a overnight meeting with Yanukovich,saying he could not negotiate while blood was being spilt.

When fighting subsided at dawn, the square resembled abattle-zone, the ground charred by Molotov cocktails. Helmetedyoung activists used pickaxes, and elderly women their barehands, to dig up paving to stock as ammunition.

The Health Ministry said 26 people were killed in fightingin the capital, of whom 10 were police officers. A ministryofficial said 263 protesters were being treated for injuries and342 police officers, mainly with gunshot wounds.

The interior ministry said five of the dead policemen werehit by identical sniper fire in the head or neck. Journalistssaw some hardline protesters carrying guns at the barricades.